ISA newbie - trying to help father

sorethumbs1992

Trying to get the best deals and returns for my fathers money.

He has 2K sat in an old Santander ISA earning 1%

His Lloyds account can offer him a 1 year fixed cash ISA of 5.5%

So can I transfer that old ISA to the new fixed rate one and earn 5.5% on the 2K?

Does that mean I can then still go ahead and open another one for this current tax year and deposit 20K?

I guess what I'm trying to get my head around is this...
If I were to have an ISA from 2016, another from 2017 and another from 2018 - all earning a paltry amount.  Could they all be transferred in to higher rate ISA's
AND 
still open a new ISA with a fresh deposit for this current year (up to 20K)

eskbanker

Yes, there are no restrictions on what can be done with prior year contributions, and none of this impacts the saver's ability to choose somewhere different for current year money.

amanda1024

Although I thought you could only 'subscribe' to one cash ISA a year - so your best bet would be to open the best available ISA (that Lloyds rate is pretty close) and put everything in it - this year's £20k plus all the bits from previous years. Make sure you follow the 'transfer' process rather than withdrawing the money. 

sorethumbs1992

Thank you for those comments.  So you think I could have this new ISA contain 2K transferred in plus add the yearly allocation of 20K meaning 22K would earn tax free interest?

If that's the case then the 22K plus its interest from this year can be all added to another new ISA next year making possibly 44K in tax free savings.  I really didn't think that would be possible.

Following on from that.  Is there any advantage in keeping older ISA's in their own separate accounts.  Am I allowed to open one new ISA to put in 20K and then open another solely to transfer from a less profitable one from a previous year?

That might be answered with 'why would you need to'

Catplan

You can open one isa for new money each tax year. You can open as many isa’s as you require for transferring previous years money. You may want to keep things separate to keep under the 85k limit, or to tier fixed rates, so lock away an isa for 1, 2, 3 or more years. You can of course transfer everything to the same isa depends on requirements and individual circumstances.

sorethumbs1992

Thanks @Catplan

I've already made the error of withdrawing 5K from an old ISA to transfer to a higher rate savings account without doing my homework.

Doctor_Who

So you think I could have this new ISA contain 2K transferred in plus add the yearly allocation of 20K meaning 22K would earn tax free interest?

Yes, if the T&Cs of the new ISA allow transfers-in.

If that's the case then the 22K plus its interest from this year can be all added to another new ISA next year making possibly 44K in tax free savings.  I really didn't think that would be possible.

There are ISA millionaires out there!

 Is there any advantage in keeping older ISA's in their own separate accounts.

Keeping each account under the £85K FSCS protection limit.

Am I allowed to open one new ISA to put in 20K and then open another solely to transfer from a less profitable one from a previous year?

Yes, you can only open and fund (add new money) to one cash ISA per tax year, but you can open as many as you want to transfer previous years' subscriptions.

Doctor_Who

sorethumbs1992 said:

Thanks @Catplan

I've already made the error of withdrawing 5K from an old ISA to transfer to a higher rate savings account without doing my homework.

If the ISA is a flexible ISA (check the T&Cs) you can return the £5K within the same tax year and it won't affect your allowance. Always use the new ISA's transfer process and never withdraw money unless you intend to spend it (or you have a flexible ISA).

sorethumbs1992

Very helpful info thank you all.

So if father is going to be paying tax (as he will be) - and if he can afford to leave his ISA funds alone without needing them the advice would be (on example 100K)

Put 20K in to ISA and 80K in high interest savings account this year - and pay tax on the 80K

Next year open new ISA 20K, transfer in this years 20K - leaving 60K in savings, paying less tax

And so on for following years, reducing tax year on year.

Am I now learning?

sorethumbs1992

Doctor_Who said:

sorethumbs1992 said:

Thanks @Catplan

I've already made the error of withdrawing 5K from an old ISA to transfer to a higher rate savings account without doing my homework.

If the ISA is a flexible ISA (check the T&Cs) you can return the £5K within the same tax year and it won't affect your allowance. Always use the new ISA's transfer process and never withdraw money unless you intend to spend it (or you have a flexible ISA).

Thanks - I've clicked on the old empty ISA that I withdrew from and it has an option to 'reactivate' but then states that after reactivating..........

Your eligibility for a Cash ISA – Tax year 2023/2024

And then goes on to say

I understand that this application shall have effect for the tax year stated at the start of this form and for each successive year in which I subscribe to the Cash ISA.


So I think reactivating and trying to add funds back in is classed as this years allocation

I'll leave it and just concentrate on the new ISA I've mentioned before and the 2K

Doctor_Who

So if father is going to be paying tax (as he will be) - and if he can afford to leave his ISA funds alone without needing them the advice would be (on example 100K)

You can always access money in an ISA, even a fixed rate ISA, however there may be a penalty fee for that access (check the T&Cs). It's a good idea to check that the rate earned in the ISA is greater than the rate earned outside the ISA after tax (ISA rates are often lower than non-ISA rates).

Put 20K in to ISA and 80K in high interest savings account this year - and pay tax on the 80K

Next year open new ISA 20K, transfer in this years 20K - leaving 60K in savings, paying less tax

And so on for following years, reducing tax year on year.

Am I now learning?

You pay tax on the interest, not the capital. Also remember the FSCS protection, so maybe have a couple of separate ISAs.

Yes!